The Cypriot banking system is known as a big offshore tax haven
for Russian oligarchs and mafia types looking to launder money.

The banks got wrecked on Greek sovereign debt, which they were
heavily invested in when the euro crisis hit.

Because Cypriot banks are mostly funded by deposits as opposed to
bank debt –
many of which are Russian deposits – the EU decided to
subject depositors in Cypriot banks to the brunt of the cost of
the bailout.

However, they decided to do it largely because the thought of
German taxpayers bailing out banks holding the deposits of
Russian money launderers doesn't play well for German politicians
ahead of German elections in September.